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Another patent invalid after KSR, with help from an innovative online litigation strategy
August 15, 2007

Peter Zura has an interesting post about a case in the Eastern District of Texas (one of the most popular districts for patent cases to be filed) where a patent was held to be both anticipated and, failing that, obvious in light of KSR. The court also addressed the concept of joint infringement, which the Federal Circuit has yet to address in detail, and found that a showing of agency or concerted action is not required to find joint infringement. Instead, a contractual relationship may be sufficient.

Interestingly, one defendant in this case solicited prior art from members of the public on its blog to help invalidate the patent. Apparently the submissions received helped the invalidity case. [Update (8/30): The New York Times has a story about the prior art search by the defendant.] This is an interesting litigation strategy, and one that could be used by defendants in other cases as a way to expand the search for potentially relevant prior art.

Quotes from the court's decision in Advanceme Inc. v. RapidPay, LLC after the jump.

Here is the court's summary of the invalidity issue:

The '281 patent is INVALID because it is OBVIOUS and ANTICIPATED. The patent-insuit, simply put, is a computerized method for securing debt with future credit card receivables. While the patent inventor, Barbara Johnson, implemented an aggressive marketing and business development program that brought this financing method to widespread use, she did not invent a new business method. Rather, Johnson built on long-established prior art, packaged the idea in a new way, and marketed it aggressively.

There are multiple prior art references, not considered by the PTO when issuing the patent, that render the patent invalid, especially in light of the Supreme Court’s recent ruling in KSR Int’l Co. v. Teleflex, Inc. In KSR, the Supreme Court opined "[w]hen a work is available in one field of endeavor, design incentives and other market forces can prompt variations of it, either in the same field or a different one. If a person of ordinary skill can implement a predictable variation, § 103 likely bars its patentability." 127 S. Ct. 1727, 1740 (2007). The Litle & Co prior art, the LeCard program, the Transmedia program, and the prior art Reserve Accounts were all available in the field at the time of the purported invention. Johnson merely implemented a predictable variation of these existing methods in establishing her invention. While Johnson’s work exhibits excellent entrepreneurship, it does not entitle AdvanceMe to a legal monopoly on this method of providing financing to small businesses. Rather AdvanceMe must continue to compete in the marketplace for its share of the market, which will benefit the economy and consumers as a whole.

Also, the court offered an interesting analysis of an issue that the Federal Circuit has yet to directly address, joint infringement, although there was mention of it in a 2006 case, On Demand Mach. Corp. v. Ingram Indus., Inc. Joint infringement is a theory of infringement that holds multiple parties liable for infringement when each party, although not individually performing all elements of the claimed invention (typically a method), fully perform the method when their acts are considered together. Joint infringement is a form of direct infringement, and as such does not necessarily require proof of intent as is the case with inducing infringement. As stated by the court (internal citation omitted):

Even if a defendant does not perform all patented method steps, the defendant is still liable for direct infringement where it is demonstrated by a preponderance of the evidence that (1) the steps of the patented method are being performed, and (2) defendant has a sufficient connection to, or control over, the entity or entities performing part of the patented method.

. . .

A showing of "agency" or "working in concert" is not required in order to establish a sufficient connection between the defendant and the third party or parties performing the patent method's steps. The sufficient connection can be shown through a contractual relationship between the defendant and the third party or parties performing the steps of the patented method.

The court found that if the patent was valid, the defendants would infringe. Of course, the patent was found invalid, so this is cold comfort for the plaintiff.

To read the full decision in Advanceme Inc. v. RapidPay, LLC, click here.

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